We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Adaptive Biotechnologies Corporation (NASDAQ:ADPT) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Adaptive Biotechnologies Corporation (NASDAQ:ADPT) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds’ portfolios at the end of the fourth quarter of 2019. At the end of this article we will also compare ADPT to other stocks including Macquarie Infrastructure Corporation (NYSE:MIC), Verint Systems Inc. (NASDAQ:VRNT), and Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) to get a better sense of its popularity.
In the 21st century investor’s toolkit there are a large number of metrics stock market investors can use to value publicly traded companies. Two of the most underrated metrics are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the best fund managers can outclass the S&P 500 by a solid margin (see the details here).
Andreas Halvorsen of Viking Global
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the new hedge fund action encompassing Adaptive Biotechnologies Corporation (NASDAQ:ADPT).
How are hedge funds trading Adaptive Biotechnologies Corporation (NASDAQ:ADPT)?
At Q4’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ADPT over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Viking Global was the largest shareholder of Adaptive Biotechnologies Corporation (NASDAQ:ADPT), with a stake worth $1149.1 million reported as of the end of September. Trailing Viking Global was Matrix Capital Management, which amassed a stake valued at $518.6 million. Senator Investment Group, Baker Bros. Advisors, and Tiger Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Matrix Capital Management allocated the biggest weight to Adaptive Biotechnologies Corporation (NASDAQ:ADPT), around 11.04% of its 13F portfolio. Tiger Management is also relatively very bullish on the stock, setting aside 9.49 percent of its 13F equity portfolio to ADPT.
Due to the fact that Adaptive Biotechnologies Corporation (NASDAQ:ADPT) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there is a sect of fund managers who were dropping their positions entirely heading into Q4. Intriguingly, Benjamin A. Smith’s Laurion Capital Management cut the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising close to $5.5 million in stock. Israel Englander’s fund, Millennium Management, also cut its stock, about $5.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to Adaptive Biotechnologies Corporation (NASDAQ:ADPT). These stocks are Macquarie Infrastructure Corporation (NYSE:MIC), Verint Systems Inc. (NASDAQ:VRNT), Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), and Antero Midstream Corp (NYSE:AM). This group of stocks’ market valuations match ADPT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MIC | 34 | 275388 | 7 |
| VRNT | 15 | 285514 | -7 |
| CBRL | 24 | 155764 | 0 |
| AM | 14 | 144307 | -2 |
| Average | 21.75 | 215243 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $215 million. That figure was $2003 million in ADPT’s case. Macquarie Infrastructure Corporation (NYSE:MIC) is the most popular stock in this table. On the other hand Antero Midstream Corp (NYSE:AM) is the least popular one with only 14 bullish hedge fund positions. Adaptive Biotechnologies Corporation (NASDAQ:ADPT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. Hedge funds were also right about betting on ADPT as the stock returned -15.5% during the first quarter (through March 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
